Published on August 7th, 2016 | by Amber Healy2
Rocked in a bad way: ASCAP, BMI lose antitrust fight
The Department of Justice’s (DoJ) antitrust division on Thursday announced it wouldn’t be modifying the 75-year-old consent decree program that governs the public performance licensing structure for BMI and ASCAP compositions. This means both publishers (Broadcast Music, Inc., and the American Society of Composers, Authors and Publishers, respectively) are now required to “issue full licenses to all the songs in their catalogs, including the ones whose songwriting teams they don’t fully represent,” according to the LA Times.
As soon as the announcement was made, ASCAP and BMI declared their intent to appeal the decision.
“The DoJ’s interpretation of our consent decree serves no one, not the marketplace, the music publishers, the music users, and most importantly, not our songwriters and composers who now have the government weighing in on their creative and financial decisions,” says Mike O’Neill, BMI’s president and CEO. “Unlike the DoJ, we believe that our consent decree permits fractional licensing, a practice that encourages competition in our industry and fosters creativity and collaboration among music creators, a factor the DoJ completely dismissed. As a result, we have no recourse other than to fight the DoJ’s interpretation in court. It won’t be easy, and we know it will take time, but we believe that it is the right thing to do and in the best interest of the industry at large.
O’Neill is joined in the statement by Elizabeth Matthews, CEO of ASCAP. She adds, “The DoJ decision puts the US completely out of step with the entire global music marketplace, denies American music creators their rights, and potentially disrupts the flow of music without any benefit to the public. That is why ASCAP will work with our allies in Congress, BMI and leaders within the music industry to explore legislative solutions to challenge the DoJ’s 100% licensing decision and enact the modifications that will protect songwriters, composers and the music we all love.”
BMI already has filed a “premotion letter” with the US District Court for the Southern District of New York, which has jurisdiction over this particular issue. The letter spells out particular questions BMI intends to ask in the appeal.
But what does this mean and why does it matter?
As Jon Healey writes for the LA Times, if the DOJ’s decision stands, it’s a victory for online music services and that’s about it.
“By saying that ASCAP and BMI are required to offer full licenses to all who seek them, the department will force the industry to rethink its approach to some of the most popular genres of music, such as Top 40 and hip hop, where songs are frequently crafted by a grab bag of unaffiliated producers and writers. Worse, songwriting groups have warned that the department’s decision (which has been rumored for several weeks) will discourage collaboration in an industry that thrives on it.”
In its 22-page decision, DoJ explains that “because a blanket license provides at a single price the rights to play many separately owned and competing songs—a practice that risks lessening competition—ASCAP and BMI have long raised antitrust concerns” about so-called 100% licensing. In fact, the consent decrees DoJ just reaffirmed were created in 1941 in response to antitrust lawsuits filed by the US against each organization, arguing that each one “had unlawfully exercised market power acquired through the aggregation of public performance rights in violation” of federal antitrust laws.
BMI and ASCAP asked for this review of the existing consent decrees, in 2014, following legal struggles with online streaming services such as Pandora over royalty payments to performers. The DoJ’s antitrust division twice called for public comments on the decrees. “During the discussions surrounding the requested modifications, it became apparent that industry participants had differing understandings of whether the (performing rights organizations) licenses provide licensees the ability to publicly perform, without risk of copyright infringement, all of the works in each of the PROs’ repertoires.”
DoJ has determined that the decrees, “which describe the PROs’ licenses as providing the ability to perform ‘works’ or ‘compositions,’ require ASCAP and BMI to offer full-work licenses. The Division reaches this determination based not only on the language of the consent decrees and its assessment of historical practices, but also because only full-work licensing can yield the substantial procompetitive benefits associated with blanket licenses that distinguish ASCAP’s and BMI’s activities from other agreements among competitors that present serious issues under the antitrust laws,” the department ruled. Further, the antitrust division has ruled against fractional licenses at this time, because it has determined that 100% licensing “has well served music creators and music users for decades and should remain intact.”
As Bloomberg Technology notes, some publishers, including Sony/ATV, were hoping for modified agreements that would have allowed them to “partially withdraw” from the PROs, which would allow individual performance licenses to be negotiated with streaming services and thereby give the composers of the current big hits to get paid more for their work. Unsurprisingly, Pandora didn’t agree with the suggested change.
Pandora didn’t immediately release a statement, but Gordon Smith, president and CEO of the National Association of Broadcasters, did, saying local radio and TV broadcasters welcome DoJ’s ruling. “We appreciate the hard work of the DOJ during its diligent, comprehensive review and believe that this decision will ensure that ASCAP and BMI continue to fairly and efficiently license musical works in a manner that is pro-competitive.”
There’s a great breakdown of what all this means over at the Future of Music Coalition’s website, detailing what each side was hoping to accomplish and what would best serve songwriters and composers.
There’s also this long but thorough infographic from Hypebot: